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Charitable Giving

01/24/2017

The high cost of a college-education is a hot topic in the news these days. What if the most expensive, and wealthiest, colleges were forced to earmark 25% of any donations to provide financial aid for middle-class students? The idea is now being floated in Congress.

Congress will soon be considering a plan that would require a quarter of the gifts to the wealthiest colleges be used for middle-class financial aid, or risk their charitable status – and the tax-deductibility of donations.

According to a recent article in Private Wealth, "Rich College Donors' Tax Break Suddenly in Danger," the idea is part of a tax proposal offered by U.S. Representative Tom Reed, a western New York Republican and vice chair of President-elect Donald Trump’s transition team.

The plan would apply to the roughly 100 colleges with endowments exceeding $1 billion. Reed wants to make sure that those institutions offer steep discounts to families with annual incomes of $24,000 to $145,000.

President-elect Trump has not endorsed this proposal, but if it passes, wealthy donors may want to revisit their estate planning and any planned gifts to these colleges to make sure that they are in compliance and gifts will be fully tax-deductible.

10/25/2016

Duke University has filed a lawsuit against Aubrey McClendon’s estate to collect a $10 million pledge and the Wills, Trusts & Estates Prof Blog considers the possible action of a court in "History of Charitable Pledges."

Wealthy people will sometimes make pledges to donate to a university or charity but in the future. This allows the donor to keep assets yet benefit from the pledge. A challenge can result when that pledge is not fulfilled.

Basically, courts will first look to see if there is an enforceable contract, either bilateral or unilateral. Failing that, the court might try to use a legal doctrine known as “promissory estoppel.” In layman's language that means something like, "You made a promise and the other party relied on it. You received some benefit from your promise, so you should not be able to disavow it."

The bottom line is that the legal system has a public policy preference of seeing that charitable pledges are fulfilled and will seek legal ways they can be enforced.

An estate planning attorney can guide you on donations you intend to make as part of your estate plan.

Robert Morin left instructions that earmarked $100,000 to the school library where he worked, but the remainder of the donation was given freely. The university quickly announced how it would spend it.

The plans include spending $1 million on a new football scoreboard, which has outraged some people who would rather the money be spent on academics.

For its part the university states that in the last years of his life Morin had grown to love football and that he would approve of the plan. The controversy is, of course, part of a much larger debate about athletics and academics at colleges.

It is unlikely to be resolved any time soon.

One lesson for donors to keep in mind is that if they do not wish for their donations to be used in specific ways, then that needs to be stated in the bequest. What Morin would have wanted cannot be definitively known.

By not leaving instructions, it has to be assumed he wanted the university to spend the money however it sees fit.

A qualified estate planning attorney can guide you on any plans for a charitable intent.

02/29/2016

Schoolteacher Anna Kurzweil left most of her estate to the Jesuits and the size of the estate came as a surprise.

Schoolteacher Anna Kurzweil, who made less than $25,000 a year, was not known as a wealthy person. She came from a farm outside of the Kansas City metro area and worked as a teacher after graduating college. She also took a job in a factory to produce airplanes during World War II.

A deeply religious woman, Kurzweil joined a religious order after the war. However, before taking her final vows she left to take care of her mother who had grown ill. Kurzweil returned to teaching and made less than $25,000 year.

Eventually, she retired and lived on a modest pension. Thus, it was a surprise when she passed away in 2012 and bequeathed $2 million to the Jesuits.

Kurzweil's secret to amassing her fortune was simple. She lived modestly and frugally. She invested her money wisely and let it grow. It also probably helped that she never married and never had children.

01/05/2016

A popular tax break since 2006 has been the IRA charitable rollover exclusion for seniors and their favorite charities and it has now been made permanent.

Seniors have often used donations to charities as a method to reduce the size of an estate for tax reasons as well as philanthropic reasons.

In 2006, Congress made it much easier for many people over 70½ to make donations. They could donate up to $100,000 directly from their traditional IRAs to charity without facing income tax penalties. However, as Congress so often does this charitable rollover exclusion was not made a permanent part of the tax code. It required periodic reauthorization.

It has recently been made permanent retroactive to Jan. 1, 2015 as reported by the Wills, Trusts & Estates Prof Blog in an article entitled "Congress Makes Permanent IRA Charitable Rollover Exclusion." Of course, this does not mean the exclusion cannot be taken out of the tax code by Congress later. It just means that it does not need reauthorization to stay in the code.

While this is a great benefit for elderly people trying to spend down their estates, it is important to remember not to start the spend down process without first consulting an estate planning attorney. Dealing with the estate tax and reducing the size of an estate should be handled as part of a larger estate plan.

The charitable rollover exclusion is the best option for some people but it is a wise course of action to consult with an estate planning attorney for all options available.

12/25/2015

A wealthy man has passed away in China leaving his estate worth more than a billion dollars to charity resulting in his sons challenging the will.

Yu Pengnian, a 93-year-old real estate executive in Hong Kong, has died and left an estate estimated at more than US$1.55 billion. Pengnian continued his life-long support to charity by leaving the bulk of his estate to a charitable foundation.

All of his assets, except for the contents of two safes given to his grandsons, were directed by will to go to a charitable foundation. His two sons were left nothing in the will. Those sons have filed will caveats with the probate court overseeing the will, which is essentially filing the same thing as a notice of intent to challenge the will.

It is possible that we will see many similar will contests all over the world in the coming decades as a recent trend has seen the extremely wealthy pledge to leave at least half of their estates to charitable causes. With billions of dollars at stake, it should come as no surprise that the families of these wealthy philanthropists might not always be pleased with giving so much away to charity.

By giving all of his money to charity and leaving nothing for his sons, Yu Pengnian might have made an avoidable mistake. It might have been better to leave something of value to his sons and include a no-contest clause in the will.

Even if there is a no-contest clause in Pengnian's will, which is unknown, it would not have stopped the sons from contesting the will as they receive nothing from it now. On the other hand, if they succeed in challenging the validity of the will, then they will each receive half of the assets of the estate.

Speaking with an estate planning attorney could help reduce the possibility of such challenges.

12/15/2015

An estate plan is often used to support important causes after a loved one has passed away and a woman in Italy found the answer by bequeathing her home to stray cats.

Fiorella Scannabissi of Bologna, Italy supplied many of the city's stray cats a home while she was alive and wanted to continue to support the cause after she passed away.

As The Local reports in "Bologna's Cats Inherit Plush Apartment," she loved the stray cats of the city so much that she left her top-floor, seven-room apartment to them. No, this is not a case where the neighbors might consider going to court to stop a messy situation.

The cats will not be living in the home worth US$243,944.

Instead, Scannabissi left instructions for her home to be sold by the local council. The proceeds from the sale will be donated to the city's cattery, which takes care of the local strays.

What this illustrates is the flexibility of estate plans.

This is just one example of what can be done in an estate plan to make sure that what you support in life continues to receive support after you pass away. For Scannabissi it just happened to be stray cats.

By meeting with an experienced estate planning attorney your support for causes may be carried on through an estate plan which is often not complicated.

11/26/2015

A nonprofit organization can find itself in financial need as donors pass away. One way to help a favorite charity is to consider leaving an endowment in your estate plan and it doesn’t have to be a lot of money.

One-time donations, either large or small, are always welcome at nonprofit charities but the key to remaining solvent is often annual donations that allow a charity to budget for the upcoming year. However, the annual donation may end when the donor passes and replacing the funding can be a challenge.

One way to avoid this problem for charities that you support is to leave an endowment for them in your estate plan.

If you annually contribute $100 to a nonprofit organization, then leaving $2,000 in an endowment is enough for that level of annual giving to continue in perpetuity. That ratio holds up no matter how much you give annually. An endowment of 20 times an annual gift should allow for the same contribution annually long after you pass away.

Many nonprofits have endowment funds to which you can contribute. For those that do not, you will want experienced help to create one.

An estate planning attorney could be helpful if you consider a charitable endowment.

11/03/2015

With a $350,000 grant, The Stanley and Elaine Ball Charitable Foundation has made it possible for the Taneyhills Library to renovate the children's area and create a technology conference room that would have otherwise been impossible for the all-volunteer library to build. The hope is that the new features will draw new users to the library and make the library a central, long-lasting resource for the community. The gift is in keeping with one of the key missions of the Foundation, which was to address children's literacy.

The Taneyhills Library in Branson, Missouri is making an investment in the future, using a bighearted grant from The Stanley and Elaine Ball Charitable Foundation that will make the library a popular center for young families and children, according to The (Branson, MO) Tri Lakes News, in "Branson library receives $350,000 grant for renovation, tech upgrades."

The gift will also fund the creation of a state-of-the-art technology conference room that will feature laptops, charging stations, a smart board, a big screen TV and conference phones.

The library has a 20-by-30-foot area that will be converted into the technology room, which will provide a facility for use by home-schoolers, business seminars, training sessions, and discussion groups. Olson said that hopefully it will also be a draw to the library.

Olson said the remodel wouldn't have been made possible without the generosity of the Stanley and Elaine Ball Charitable Foundation. It was the belief and passion for what these upgrades could do for the library that impressed the foundation committee in its decision to grant the money. The library hopes that this gift will help put the library "back on the map," increase visibility, and up use of the library.

Stanley Ball, who was once mayor of Branson, was a generous person, as in his estate planning, he left enough to take care of his family—then left the rest to do wonderful things like this for the communities that were so good to him.

Talk to your estate planning attorney about charitable giving in your planning. Whether you gift a little or a lot, it could make a big difference to the work of your favorite charity.

11/02/2015

With the holiday season on the horizon, the end of year financial season has arrived. It's time to deal with money issues relating to income tax planning, charitable giving and scams and the annual check up on family finances. There is not too much in the way of tax drama in the final weeks of the year, with no major legislation being passed, but a few popular tax provisions are still undecided. Congress needs to act soon to extend these favorites, which include a higher education tuition and fees deduction, a mortgage debt forgiveness exclusion and a classroom expense deduction for teachers

Several popular tax provisions are awaiting Congressional extension if they are to survive past the end of the year. Among them is one that will likely impact a consumer's decision to make any big ticket purchases before the year's end, according to TheArizona Republic. This is an option to take a deduction of state and local sales taxes in place of state and local income taxes.

The article, "Time for seasonal planning for taxes, charities, more," notes that one of the extenders in limbo is the option for people age 70½ and older to donate an IRA distribution to charity, rather than include it first as taxable income. This could be an issue for those seniors trying to decide how much of their required minimum distributions to take before the end of the year. A large 50% tax penalty applies on the amount of required minimum distributions that isn't taken.

The capital-gains rules are pretty much the same this year, but some will see some big losses for the first time in a while due to the late-summer swoon in the stock market. Investors are always prudent to look at paper gains and losses in taxable accounts, with an eye on realizing losses before end of the year. If your losses exceed gains, up to $3,000 of the excess can be used to offset ordinary income. Additional losses can be carried forward to future years.

Otherwise, taxpayers generally would be better off deferring taxable income to next year, if they can, while accelerating deductions so they can be taken in 2015. However, that strategy doesn't necessarily play out if you think you'll have much larger deductible expenses next year. In that case, it might be wise to group deductions into either this year or next, if you believe you're not going to qualify to itemize both years. For instance, charitable donations are one type of deductible expense with timing that's easy to control.

Make certain that your gifts count by conducting some research on the groups. Look for non-profits with missions with which you agree and search for their impact, such as the number of meals served, low-income homes built, or animals rescued. Non-profits that are run efficiently are better choices, where most of the money raised is earmarked for programs and not overhead, like executive salaries.

Make sure that the charity is for real. Many seniors are susceptible to giving away their money for reasons such as fear, loneliness, or cognitive problems. Fraudsters prey on these folks.

Be aware of several telltale signs that there might be a problem. Some are obvious, like large, unexplained loans taken out by a senior, or if you see that certain personal belongings are missing. Also, watch for large credit-card charges, gifts to a caretaker, routine bills not being paid, and changes to the person's will or other estate-planning documents.

A sudden increase in spending and atypical, big withdrawals are red flags. Another tip-off is a senior looking to buy risky assets that are out of character with his or her stated investment objectives.

It can be a good idea for elderly folks to sign emergency contact forms—before its needed—that authorizes a trusted adviser to speak with adult children or other relatives in case of emergencies or if they feel there's a problem. Otherwise, account-privacy laws can stifle this type of communication.